Converting to JSPP Models
A JSPP is a DB pension plan in which the employer(s) and plan members share responsibility for the plan’s governance and funding. Employers and members jointly determine contribution levels, the allocation of surplus and how deficits are funded.
The 2013 Budget announced the government’s intent to facilitate the transfer of assets from employer-sponsored, single-employer pension plans (SEPPs) to JSPPs and to allow employer-sponsored SEPPs to be converted to JSPPs. Through this Budget, the government is fulfilling this commitment by introducing legislative amendments to the Pension Benefits Act that would create regulatory authority to prescribe requirements for plan conversion.
To ensure that the new JSPP protects the existing pension entitlements for converting members, and is transparent and voluntary, the amendments would require that:
The same pension be provided to retirees and the equivalent value be provided to current employees upon conversion;
Notice be provided to all plan beneficiaries and trade unions;
Consent of plan beneficiaries be obtained prior to the plan conversion; and
The approval of the Superintendent of Financial Services be granted.
In some circumstances, plan sponsors may prefer to transfer their pension responsibilities to an existing JSPP. The government intends to make regulations to ensure that the assets transferred are sufficient to fund the transferred liabilities, while not unduly subsidizing or enriching existing JSPP beneficiaries.
The government recognizes that the availability of an exemption from solvency funding rules for new JSPPs is an important factor for stakeholders exploring conversions.
Employers and plan members joining an existing JSPP that is already exempt from solvency funding requirements would receive the same treatment.
The government will consider exempting new JSPPs that involve multiple employers from solvency funding requirements, subject to certain criteria, to be developed in consultation with stakeholders. For new single-employer JSPPs, consideration will be given to whether sufficient protections are in place for members and whether the plans can be expected to be sustainable in the future before providing a similar solvency exemption.